Chapter 10 New Product Process

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Chapter 10New Product Process
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What is a Product?

• A good, service, or idea consisting of a bundle
  of tangible and intangible attributes that
  satisfies consumers which they receive in
  exchange for money or some other unit of value.
• Difference between a good and a service?

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Terms to Describe a Companys Assortment of
Products

• Product line
• Product item
• Product mix

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Classifying Products

• Consumer Products
• Convenience
• Shopping
• Specialty
• Unsought
• Business Products
• Production
• Support

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Classification of Consumer Products
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How Do You Define New Product

• Term new is hard to define
• If a product is functionally different from
  existing products, it can be defined as new.
• Sometimes newness is revolutionary
• Sometimes it merely means adding features to an
  existing product

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What do these products have in common?

• Bic Perfume
• Fab 1 Shot
• Wheaties Dunk-A-Balls
• Dr. Care Toothpaste
• Avert Virucidal Tissues
• Fingoes
• La Choys Fresh and Lite Frozen Entrees

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FIGURE 10-3 Why did these new products fail?
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Why Did this Product Fail?

• La Choy launched a line of frozen egg rolls. Not
  measly little appetizer egg rolls, but big meaty
  egg rolls that a consumer would eat as a main
  course. These egg rolls were a part of the Fresh
  and Lite line of low fat frozen Chinese entrees.
  La Choy had a well known brand name ethnic
  cuisine was soaring in popularity so were frozen
  meals. Why did this product fail?

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Many new products fail each year.

• Failures range from 33 percent to 90 percent
  depending on the industry.

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What is the New Product Process?

• The stages a firm goes through to identify
  business opportunities and convert them to a
  salable good or service.

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Stage 1 New-Product Strategy Development

• Purpose
• Scan the environment to identify trends that
  present marketing opportunities or threats.
• Evaluate existing strengths and weaknesses
• This stage serves as valuable input to later
  stages

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Stage 2 Idea Generation

• Purpose to identify as many new product ideas
  as possible
• Sources
• 1. Customers
• 2. Company Research and Development
• 3. Sales representatives / employees
• 4. Competitors

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Stage 3 Screening

• Internal Approach The firm establishes a set of
  criteria that the idea must pass in order to be
  considered further.
• External Approach Calls for testing the product
  concept with an appropriate group of target
  consumers.
• Relies on written descriptions of the product
  and/or sketches. No physical product yet.

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Stage 4 Business Analysis

• Assesses the potential profitability of the
  product concept
• Estimate sales
• Estimate costs

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Stage 5 Product Development

• The product concept described on paper is turned
  into a physical product called a prototype.
• The prototype is tested with sample groups from
  the target market.

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Stage 6 Market Testing

• Product is tested under realistic purchase
  conditions.
• Purpose to see how targeted consumers respond
  to product and other marketing mix elements
• Product is introduced in one or more test cities

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FIGURE 10-5 Six important U.S. test markets and
the demographics winnerWichita Falls, Texas,
metropolitan statistical area
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Stage 7 Commercialization

• Product is sold in the marketplace.
• Involves setting up
• manufacturing facilities
• Channels of distribution
• Promotion for the product
• Will often use a regional roll out